"Just Getting Started, But What Now?" Internet Banks Struggle with Total Volume Regulation

Inbaeng, Next Year's Household Loan Total Target Likely 7-8%
Higher Than Commercial Banks but Loan Capacity Insufficient Considering Scale

[Asia Economy Reporter Kim Jin-ho] Internet-only banks are struggling under the household loan volume regulation. They had planned to expand their scale by launching new products such as mortgage loans next year, but the authorities' stringent tightening of loans is making it difficult to establish business strategies. Industry insiders are calling for a more relaxed application of the volume regulation, considering that internet-only banks are still in the 'infant stage' compared to major banks.

According to the financial sector on the 3rd, financial authorities plan to finalize the household loan limits for internet banks for next year soon. A senior official from the financial authorities said, "We are currently negotiating the target growth rate for household loans with internet banks for next year."

Major commercial banks have already submitted their household loan volume targets for next year at '4-5%'. Considering that this year's volume regulation was in the 6% range, this means it will become tighter.

For internet-only banks, it is reported that the target is likely to be higher, around '7-8%'. This is because their loan scale is not as large as commercial banks and they mainly operate with unsecured loans.

However, internet-only banks are concerned that if the household loan volume target is set at '7-8%', it will significantly restrict their growth. The common view is that this level is too low given the size and foundational strength of internet banks.

For example, a bank with 200 trillion won in loans would be allowed to increase household loans by 10 trillion won next year if given a 5% limit. In contrast, Kakao Bank, with loans of 25 trillion won as of the third quarter, would have only 2 trillion won in additional lending capacity even if given an 8% limit. K Bank, which is smaller in scale, would have about 480 billion won.

However, internet-only banks cannot raise strong voices to the financial authorities and are left to suffer quietly. While they agree with the policy to curb household loans, it is a matter of survival to continue their growth. In fact, internet banks that had set goals to actively launch new products such as mortgage loans next year face the possibility that the launches themselves may become meaningless. An official from an internet bank said, "If the lending capacity significantly decreases, there is a risk that overall bank growth, including customer acquisition, will slow down," adding, "We hope that household loan limits will be set more carefully according to the circumstances of each internet bank."

Some in the financial sector argue that, considering the purpose of launching internet banks and their growth, an exemption from the volume regulation should be made for loans to middle- and low-credit borrowers. This would mean actively promoting the government's desired mid-interest rate loans while excluding them from the limits. A financial sector official pointed out, "If the household loan volume target for next year is around 7-8%, it will be a harsh year for internet banks," adding, "Considering that internet banks are still in the infant stage, some consideration such as excluding loans to middle- and low-credit borrowers from the limits is necessary."